_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File Number 0-1125
MADISON GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0444025
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
133 South Blair Street
Post Office Box 1231
Madison, Wisconsin 53701-1231
(Address of principal executive offices)
(ZIP Code)
(608) 252-7923
(Registrant's telephone number, including area code)
Common Stock outstanding at May 13, 1994: 10,719,812 shares
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Madison Gas and Electric Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED INCOME
(Thousands of Dollars, Except Per-Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
STATEMENTS OF INCOME
Operating Revenues (Note 4):
Electric $35,262 $34,771
Gas 46,871 38,180
Total Operating Revenues 82,133 72,951
Operating Expenses:
Fuel for electric generation 6,678 6,297
Purchased power 1,666 2,018
Natural gas purchased 31,178 24,561
Other operations 14,512 14,176
Maintenance 2,735 3,336
Depreciation and amortization 5,602 5,307
Other general taxes 2,315 2,126
Income tax items 5,793 4,409
Total Operating Expenses 70,479 62,230
Net Operating Income 11,654 10,721
Allowance for funds used during
construction - equity funds 34 13
Other Income, Net 551 512
Income Before Interest Expense 12,239 11,246
Interest Expense:
Interest on long-term debt 2,620 2,985
Other interest 113 102
Allowance for funds used during
construction - borrowed funds (19) (9)
Net Interest Expense 2,714 3,078
Net Income 9,525 8,168
Preferred Stock Dividends 120 124
Earnings on Common Stock $9,405 $8,044
Earnings Per Share
of Common Stock (Note 3) $0.88 $0.75
STATEMENTS OF RETAINED INCOME
Balance--Beginning of Period 72,865 68,380
Earnings on Common Stock 9,405 8,044
Cash Dividends on Common Stock (Note 3) (4,985) (4,868)
Balance--End of Period 77,285 71,556
</TABLE>
[FN]
The accompanying notes are an integral part of the above statements.
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Madison Gas and Electric Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1994 1993
<S> <C> <C>
ASSETS
Utility Plant, at original cost
In service - Electric $469,188 $466,984
Gas 159,587 158,458
Gross Plant in Service 628,775 625,442
Less - Accumulated provision for
depreciation (308,407) (302,904)
Net Plant in Service 320,368 322,538
Construction work in progress 12,669 12,251
Nuclear decommissioning fund (Note 2) 26,025 25,499
Nuclear fuel, net 7,182 8,305
Total Utility Plant 366,244 368,593
Other Property and Investments 7,969 9,822
Current Assets
Cash 1,762 1,391
Deposits for jointly owned electric
power production facilities 2,581 2,787
Temporary cash investments 4,497 -
Accounts receivable, less reserves of
$1,074 and $973, respectively 16,373 10,593
Unbilled revenue 8,284 11,458
Materials and supplies, at average cost 7,188 7,254
Fossil fuel, at average cost 3,718 3,333
Stored natural gas, at average cost 730 10,562
Prepaid taxes 4,286 5,693
Other prepayments 825 1,126
Total Current Assets 50,244 54,197
Deferred Charges 29,239 32,752
Total Assets 453,696 465,364
CAPITALIZATION AND LIABILITIES
Capitalization (see statement) 318,648 310,791
Current Liabilities
Preferred stock sinking fund requirement 100 100
Interim loans -- commercial paper
outstanding - 23,500
Accounts payable 16,810 17,890
Accrued taxes 6,176 2,056
Accrued interest 4,002 2,810
Other 5,751 5,998
Total Current Liabilities 32,839 52,354
Other Credits
Accumulated deferred income taxes 54,830 54,167
Regulatory liability (Note 7) 25,152 25,264
Investment tax credit - deferred 13,590 13,781
Other 8,637 9,007
Total Other Credits 102,209 102,219
Commitments and Contingencies (Note 5) - -
Total Capitalization and Liabilities $453,696 $465,364
</TABLE>
[FN]
The accompanying notes are an integral part of the above balance
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Madison Gas and Electric Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1994 1993
<S> <C> <C>
Common Shareholders' Equity
Common Stock - Par value $8 per share -
authorized 28,000,000 shares
outstanding 10,719,812 shares, $ 85,758 $ 85,758
Amount received in excess of par value 26,372 26,372
Retained income 77,285 72,865
Total Common Shareholders' Equity 189,415 184,995
Redeemable Preferred Stock cumulative,
$25 par value, authorized 1,199,000 shares
Series E, 8.70%, 220,000 shares outstanding,
less current sinking fund requirements of $100 5,400 5,400
First Mortgage Bonds
5.45%, 1996 series 8,000 8,000
7 3/4%, 2001 series 11,478 11,482
6 1/2%, 2006 series, Pollution Control Revenue
Bonds, principal amount $8,780, less construction
fund of $1,568 and $1,556, respectively 7,212 7,224
8.50%, 2022 series 40,000 40,000
6.75%, 2027A series, Industrial Development
Revenue Bonds principal amount $28,000, less
construction fund of $13,980 and $17,426,
respectively 14,020 10,574
6.70%, 2027B series, Industrial Development
Revenue Bonds 19,300 19,300
7.70%, 2028 series 25,000 25,000
First Mortgage Bonds Outstanding 125,010 121,580
Unamortized discount and premium on bonds, net (1,177) (1,184)
Total First Mortgage Bonds 123,833 120,396
Total Capitalization $318,648 $310,791
</TABLE>
[FN]
The accompanying notes are an integral part of the above statements.
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Madison Gas and Electric Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousand of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 9,525 $ 8,168
Items not affecting working capital:
Depreciation and amortization 5,602 5,307
Deferred income taxes 551 1,096
Amortization of nuclear fuel 628 574
Amortization of investment tax credits (191) (200)
Allowance for funds used during
construction - equity funds (34) (13)
Other (13) 132
Net Funds Provided from Operations 16,068 15,064
Changes in working capital, excluding cash,
sinking funds, maturities, and interim loans:
Decrease in current assets 4,324 7,738
Increase in current liabilities 3,985 4,151
Other noncurrent items, net 5,381 (29)
Cash Provided by Operating Activities 29,758 26,924
FINANCING ACTIVITIES
Cash dividends on common and preferred stock (5,105) (4,992)
Sale of First Mortgage Bonds - 25,000
Maturities/redemptions of First Mortgage Bonds - (25,000)
Other increases/(decreases) in First Mortgage Bonds 3 (148)
Decrease in bond construction funds 3,434 739
Decrease in interim loans (23,500) (15,000)
Cash used for Financing Activities (25,168) (19,401)
INVESTING ACTIVITIES
Additions to utility plant and nuclear fuel (3,674) (4,450)
Allowance for funds used during construction -
borrowed funds (19) (9)
Increase in decommissioning fund (526) (679)
Cash used for Investing Activities (4,219) (5,138)
CHANGE IN CASH (Note 6) 371 2,385
Cash at Beginning of Period 1,391 2,030
Cash at End of Period $1,762 $4,415
</TABLE>
[FN]
The accompanying notes are an integral part of the above statement
<PAGE>
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MADISON GAS AND ELECTRIC COMPANY
Notes to Consolidated Financial Statements (Unaudited)
March 31, 1994
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not
misleading. In the opinion of Company management, all adjustments (consisting
of only normal recurring adjustments) necessary to fairly present results have
been made. It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto set
forth on pages 17 through 26 of the Company's 1993 Annual Report to
Shareholders and in the Company's 1993 Annual Report on Form 10-K.
1. Summary of Significant Accounting Policies
The accounting and financial policies relative to the following items
have been described in the "Notes to Consolidated Financial Statements"
in the Company's 1993 Annual Report to Shareholders and have been omitted
herein because they have not changed materially through the date of this
report.
a. Basis of consolidation
b. Revenue recognition
c. Utility plant
d. Nuclear fuel
e. Joint plant ownership
f. Depreciation
g. Income taxes
h. Accounts receivable
i. Pension plans
j. Postretirement benefits other than pensions
k. Postemployment benefits other than pensions and health care
l. Fair value of financial instruments
m. Capitalization matters--common stock, redeemable preferred stock,
First Mortgage Bonds, notes payable to banks, commercial paper, and
lines of credit
n. Segments of business
2. Nuclear Decommissioning
Nuclear decommissioning costs are accrued over the estimated service life
of Kewaunee nuclear plant (Kewaunee), which is through the year 2013.
These costs are currently recovered from customers in rates and are
deposited in external trusts. For 1994, decommissioning costs recovered
in rates will be $1.3 million. These trusts are shown on the balance
sheet in the utility plant section, and as of March 31, 1994, these
trusts totalled $26 million.
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Notes to Consolidated Financial Statements (Unaudited) (continued)
Decommissioning costs are recovered through depreciation expense,
exclusive of earnings on the trusts. Net earnings on the trusts are
included in other income. The long-term after-tax earnings assumption on
these trusts is 5.0 percent. As of March 31, 1994, the accumulated
provision for depreciation included accumulated provisions for
decommissioning totalling $26 million.
The Company's share of Kewaunee decommissioning costs is estimated to be
$65 million in current dollars based on a site-specific study performed
in 1992 using immediate dismantlement as the method of decommissioning.
Based on the Company's current rate filing (see Note 4), decommissioning
costs are assumed to inflate at a rate of 5.0 percent. Physical
decommissioning is expected to occur during the period 2014-2021, with
additional expenditures being incurred during the period 2022-2050
related to the storage of spent nuclear fuel at the site. The
undiscounted amount of decommissioning costs to be expended between the
years 2014-2050 is estimated to be $271.3 million.
3. Per-Share Amounts
Earnings per share of common stock are computed on the basis of the
weighted average of the daily number of shares outstanding, and for the
three months ended March 31, 1994 and 1993, were 10,719,812 and
10,697,218 shares.
Dividends declared and paid per share of common stock for the three
months ended March 31, 1994 and 1993, were $0.465 and $0.455.
4. Rate Matters
In April 1994, the Company announced its intention to reduce electric
rates for the test period beginning January 1, 1995, by approximately
$5.8 million and freeze natural gas rates for the same time period. The
proposed changes would remain in effect through December 31, 1996.
5. Commitments and Contingencies
ANR Pipeline Company (ANR) and Northern Natural Gas Company (NNG) have
both entered into settlements with their gas suppliers concerning take-
or-pay provisions of gas supply contracts that are being canceled and
other transition costs associated with implementation of Order 636.
Known charges currently applicable to the Company for take-or-pay or
transition costs on ANR are $830,000 including interest. This is being
paid to ANR as a fixed charge through July 31, 1995. Also, a volumetric
surcharge is being paid to both ANR and NNG. ANR's surcharge is applied
through April 1998; NNG's is effective through May 1996. These amounts
will change over time. The PSCW has approved procedures whereby the
Company is allowed to recover both the fixed and volumetric take-or-pay
charges in rates.
6. Supplemental Cash Flow Information
For purposes of the Consolidated Statements of Cash Flows, the Company
considers cash equivalents to be cash on hand.
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Notes to Consolidated Financial Statements (Unaudited) (continued)
Cash payments for interest, net of amounts capitalized, and income taxes
were as follows (in thousands of dollars):
Three Months Ended
March 31
1994 1993
Interest, net of amounts capitalized $1,551 $1,791
Income taxes paid $ 625 $ 827
7. Regulatory Liability
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
cumulative effect of implementation on net earnings for the three months
ended March 31, 1993, was insignificant.
As a result of applying the provisions of SFAS No. 109, the Company has
recorded, at March 31, 1994, a regulatory liability of $25,152,000, which
represents the probable future cash flow associated with deferred taxes
previously collected from ratepayers.
8. Accounting Policies
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," which addresses
the accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. The adoption of SFAS No. 115 did not have a material effect
on the financial position of the Company.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Company's internally generated funds were greater than the funds used for
construction and nuclear fuel expenditures during the three months ended
March 31, 1994 and 1993, respectively. It is anticipated that 1994
construction and nuclear fuel expenditures will be $20 million. The Company
also expects to capitalize about $3 million of spending on conservation
programs. The Company expects to meet these requirements with internally
generated funds and construction fund draw-downs.
Bank lines of credit available to the Company are currently $25 million.
The Company's capitalization ratios were as follows:
March 31, 1994 December 31, 1993
Common Shareholders' Equity 59.4% 55.3%
Redeemable Preferred Stock* 1.7 1.7
Long-term Debt 38.9 36.0
Short-term Debt 0.0 7.0
*Includes current maturities and current sinking fund requirements.
The Company's bonds are currently rated AA by Fitch Investors Service, Inc.;
Aa2 by Moody's Investors Service, Inc.; and AA by Standard & Poor's
Corporation. The Company's dealer-issued commercial paper carries the highest
ratings assigned by Moody's and Standard & Poor's.
RESULTS OF OPERATIONS
Electric Revenues
Electric retail sales increased approximately 3 percent in the three-month
period ending March 31, 1994, over the comparable period last year. Electric
operating revenues for the same period increased 1.4 percent over the 1993
period. The increased sales for the three months ended March 31, 1994 was
due, in part, to an increased customer base of approximately 2 percent for the
comparative three-month period ended a year ago.
The operating revenues increase was due to the increased customer base which
was partially offset by the Company's 2.9 percent rate decrease implemented in
June 1993.
Gas Revenues
For the three months ended March 31, 1994, gas revenues increased about
23 percent as compared to the same period last year. Retail gas sold for the
same time periods increased 15 percent or 11.4 million therms. The
significant increase in both sales and revenues was due to the cold weather
experienced in January and February of this year.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
Average temperature for the three-months ended March 31, 1994, was
20.3 degrees Fahrenheit as compared to 25.0 degrees Fahrenheit for the same
three months ended last year and compared to a normal of 24.6 degrees
Fahrenheit.
The gas customer base increased approximately 5 percent for the three-months
ended March 31, 1994, when compared to the same time period a year ago. This
was aided by the acquisition of two gas utilities, with estimated revenues of
about $1.7 million on an annualized basis.
The Company actively manages contacts with natural gas suppliers to assure
that adequate supplies of gas will be available to meet the long-term needs of
its customers.
Electric Fuel and Natural Gas Costs
Fuel cost for electric generation and purchased power, combined, increased
less than 1 percent for the first three months of 1994 when compared to the
same time period last year.
Natural gas costs for the three-months ended March 31, 1994, versus the 1993
comparative period increased about 27 percent. This is due mainly to an
increased customer base, higher demand due to the cold weather, and an
increase in the cost per therm.
Other Operating Expenses
Other operations and maintenance expenses decreased 1.5 percent for the first
three months versus the first quarter of 1993 despite customer growth and an
inflationary increase in material and labor costs.
Income tax items increased approximately 30 percent for the first three months
of 1994 when compared to the same time period in 1993. This was mainly
attributable to an increase in the federal tax rate from 34 to 35 percent and
the higher first quarter taxable earnings in 1994.
Other Items
Interest expense for the three months ended March 31, 1994, decreased
approximately 11 percent when compared to the same time period for 1993. This
is due to the Company refinancing its long-term debt at lower interest rates.
The Company is currently under union contract negotiations with both the
Office and Professional Employees International Union (OPEIU) and the
International Brotherhood of Electrical Workers (IBEW).
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PART II. OTHER INFORMATION
Item 6 (a) Exhibits
Exh. No. Description of Document
4 Indenture of Mortgage and Deed of Trust between the Company
and Firstar Trust Company, as Trustee (and supplements)
reference was provided in the Company's 1993 Annual Report on
Form 10-K (Commission File No. 0-1125).
Item 6 (b) Reports on Form 8-K
On March 4, 1994, the Company filed a Current Report on
Form 8-K dated February 11, 1994, under Item 5, "Other
Events," which contains, under Exhibit 99, the audited
consolidated financial statements of the Company for the year
ended December 31, 1993; Notes to Consolidated Financial
Statements; and Management's Discussion and Analysis of
Financial Condition and Operations.
Item 12 Ratio of Earnings to Fixed Charges
Three Months Ended
March 31, 1994
Earnings
Income before interest expense $12,239
Add:
Income tax items 5,793
Income tax on other income 105
Amortization of debt discount,
premium expense 43
Allowance for funds used during
construction - borrowed funds 19
Interest on rentals 186
Total Earnings $18,385
Fixed Charges
Interest on long-term debt $2,620
Other interest 113
Amortization of debt discount
premium expense 43
Interest on rentals 186
Total Fixed Charges $2,962
Ratio of Earnings to Fixed Charges 6.21x
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S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MADISON GAS AND ELECTRIC COMPANY
(Registrant)
Date: May 13, 1994 /s/ David C. Mebane
David C. Mebane
Chairman, President and
Chief Executive Officer
(Duly Authorized Officer)
Date: May 13, 1994 /s/ Joseph T. Krzos
Joseph T. Krzos
Vice President - Finance
(Chief Financial and
Accounting Officer)
